ECB President Mario Draghi announced that the European Central Bank will buy Italian and Spanish bonds on the open market, but only after euro zone governments have activated bailout funds to do the same, Reuters reported.
According to Bloomberg, though the ECB bond purchases would focus on shorter-term maturities, they would soothe investors' concerns about seniority, and wouldn't breach EU rules that prohibit financing government deficits, Draghi said while in Frankfurt today. The plan and details will be fleshed out in the coming weeks, and would start at the earliest by September.
“Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner,” Draghi said at a press conference. He decided to keep the benchmark interest rate on hold at 0.75 percent.
“The euro is irreversible. There is a “severe malfunctioning” in bond markets, he said.
Draghi also acknowledged that German central bank chief Jens Weidmann had expressed reservations about bond-buying.
According to the Wall Street Journal, markets spun into reverse after Draghi's speech indicated that he wasn't going to back up his "bold talks" last week by not announcing any new programs or re-opening any moribund programs.
Bloomberg also reported that the euro declined and Spanish bond yields rose after Draghi's remarks. Previously, markets had been soaring on optimism that he would announce a bond-purchase plan that would end the debt crisis.